By Eiland H.B. No. 1966
77R4107 PB-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to an exemption from form and rate filing requirements for
1-3 commercial motor vehicle insurance and certain insurance policies
1-4 issued to large risks.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Section 1, Article 5.13-2, Insurance Code, is
1-7 amended to read as follows:
1-8 Sec. 1. APPLICABILITY; PURPOSE. (a) This article governs
1-9 the regulation of general liability, commercial property, which
1-10 shall include farm and ranch owners and farm and ranch policies,
1-11 all commercial casualty, commercial motor vehicle, and medical
1-12 professional liability insurance rates and forms. It does not
1-13 govern private passenger automobile insurance or[,] fidelity,
1-14 surety, or guaranty bonds.
1-15 (b) The purposes of this article are to:
1-16 (1) promote the public welfare by regulating insurance
1-17 rates to prohibit excessive, inadequate, or unfairly discriminatory
1-18 rates;
1-19 (2) promote availability of insurance;
1-20 (3) promote price competition among insurers to
1-21 provide rates and premiums that are responsive to competitive
1-22 market conditions;
1-23 (4) prohibit price-fixing agreements and other
1-24 anticompetitive behavior by insurers;
2-1 (5) regulate the insurance forms used for lines of
2-2 insurance subject to this article to ensure that they are not
2-3 unjust, unfair, inequitable, misleading, or deceptive; and
2-4 (6) provide regulatory procedures for the maintenance
2-5 of appropriate information reporting systems.
2-6 SECTION 2. Section 2, Article 5.13-2, Insurance Code, is
2-7 amended to read as follows:
2-8 Sec. 2. SCOPE. This article applies to all lines of general
2-9 liability, commercial property, commercial motor vehicle, all
2-10 commercial casualty, and medical professional liability insurance
2-11 written under policies or contracts of insurance issued by a
2-12 licensed insurer, other than a fidelity, surety, or guaranty bond
2-13 [or an automobile insurance policy].
2-14 SECTION 3. Section 3, Article 5.13-2, Insurance Code, is
2-15 amended to read as follows:
2-16 Sec. 3. DEFINITIONS. In this article:
2-17 (1) "Filer" means an insurer that files rates,
2-18 prospective loss costs, or supplementary rating information under
2-19 this article.
2-20 (2) "Insurer" means an insurer to which Article 5.13
2-21 of this code applies, but does not include the Texas Windstorm
2-22 Insurance Association. However, the provisions of Sections 4, 5,
2-23 6, and 7 of this article shall not apply to Lloyd's or reciprocals
2-24 with respect to commercial property insurance.
2-25 (3) "Large risk" means an insured that employs the
2-26 services of an insurance agent or broker and certifies to the
2-27 department in the manner prescribed by the commissioner that it
3-1 meets any two of the following criteria:
3-2 (A) has total insured property values of $5
3-3 million or more;
3-4 (B) has total annual net revenues or sales
3-5 greater than $10 million;
3-6 (C) has a total premium of:
3-7 (i) $25,000 or more for property
3-8 insurance;
3-9 (ii) $25,000 or more for general liability
3-10 insurance;
3-11 (iii) $25,000 or more for commercial motor
3-12 vehicle insurance; or
3-13 (iv) $50,000 or more for multiperil
3-14 insurance;
3-15 (D) employs more than 50 employees;
3-16 (E) procures its insurance through a full-time
3-17 risk manager or a retained qualified insurance consultant;
3-18 (F) possesses a net worth of $25 million or
3-19 more;
3-20 (G) is a not-for-profit organization or a public
3-21 body or agency generating annual budgeted expenditures of $25
3-22 million or more; or
3-23 (H) is a municipality with a population of
3-24 50,000 or more.
3-25 (4) "Prospective loss costs" means that portion of a
3-26 rate that does not include provisions for profit or expenses, other
3-27 than loss adjustment expenses, that is based on historical
4-1 aggregate losses and loss adjustment expenses projected by
4-2 development to their ultimate value and through trending to a
4-3 future point in time.
4-4 (5) [(4)] "Rate" means the cost of insurance per
4-5 exposure unit, whether expressed as a single number or as a
4-6 prospective loss cost, with an adjustment to account for the
4-7 treatment of expenses, profit, and individual insurer variation in
4-8 loss experience, before any application of individual risk
4-9 variations based on loss or expense considerations. The term does
4-10 not include a minimum premium.
4-11 (6) [(5)] "Supplementary rating information" means any
4-12 manual, rating schedule, plan of rules, rating rules,
4-13 classification systems, territory codes and descriptions, rating
4-14 plans, and other similar information used by the insurer to
4-15 determine the applicable premium for an insured. The term includes
4-16 factors and relativities, such as increased limits factors,
4-17 classification relativities, deductible relativities, premium
4-18 discount, and other similar factors and rating plans such as
4-19 experience, schedule, and retrospective rating.
4-20 (7) [(6)] "Supporting information" means:
4-21 (A) the experience and judgment of the filer and
4-22 the experience or information of other insurers or advisory
4-23 organizations relied on by the filer;
4-24 (B) the interpretation of any other information
4-25 relied on by the filer;
4-26 (C) descriptions of methods used in making the
4-27 rates; and
5-1 (D) any other information required by the
5-2 department to be filed.
5-3 SECTION 4. Section 5, Article 5.13-2, Insurance Code, is
5-4 amended by amending Subsection (a) and adding Subsection (f) to
5-5 read as follows:
5-6 (a) Except as provided by Subsection (f) of this section,
5-7 each [Each] insurer shall file with the commissioner all rates,
5-8 supplementary rating information, and reasonable and pertinent
5-9 supporting information for risks written in this state.
5-10 (f) The requirements of Subsections (a), (b), and (e) of
5-11 this section do not apply to an insurance policy sold to a large
5-12 risk.
5-13 SECTION 5. Section 8(f), Article 5.13-2, Insurance Code, is
5-14 amended to read as follows:
5-15 (f) Policy forms for use with large risks are exempt from
5-16 the requirements of Subsections (a), (b), and (e) of this section.
5-17 [For purposes of this subsection, "large risk" means:]
5-18 [(1) an insured that has total insured property values
5-19 of $5 million or more;]
5-20 [(2) an insured that has total annual gross revenues
5-21 of $10 million or more; or]
5-22 [(3) an insured that has a total premium of $25,000 or
5-23 more for property insurance, $25,000 or more for general liability
5-24 insurance, or $50,000 or more for multiperil insurance.]
5-25 SECTION 6. Article 5.13-2, Insurance Code, is amended by
5-26 adding Sections 11 and 12 to read as follows:
5-27 Sec. 11. DISCLAIMER. A policy subject to this article that
6-1 is issued to a large risk must contain a disclaimer in language
6-2 similar to the following: "This policy is exempt from the rate
6-3 filing and policy form approval requirements of Article 5.13-2,
6-4 Insurance Code."
6-5 Sec. 12. RULEMAKING. The commissioner may adopt rules as
6-6 necessary to implement this article.
6-7 SECTION 7. Article 5.01(f), Insurance Code, is amended to
6-8 read as follows:
6-9 (f) Notwithstanding Subsections (a) through (d) of this
6-10 article, [on and after March 1, 1992,] rates for motor vehicle
6-11 insurance in this state are determined as provided by Article
6-12 5.13-2 of this code or by the flexible rating program adopted under
6-13 Subchapter M of this chapter, as applicable.
6-14 SECTION 8. Article 5.01-2(b), Insurance Code, is amended to
6-15 read as follows:
6-16 (b) Rates [On and after March 1, 1992, rates] for motor
6-17 vehicle insurance written by a Lloyd's plan insurer or a reciprocal
6-18 or interinsurance exchange are determined as provided by Article
6-19 5.13-2 of this code or by the flexible rating program adopted under
6-20 Subchapter M of this chapter, as applicable.
6-21 SECTION 9. Article 5.03(g), Insurance Code, is amended to
6-22 read as follows:
6-23 (g) Notwithstanding Subsections [Sections] (a) through (e)
6-24 of this article, [on and after March 1, 1992,] rates for motor
6-25 vehicles are determined as provided by Article 5.13-2 of this code
6-26 or by the flexible rating program adopted under Subchapter M of
6-27 this chapter, as applicable.
7-1 SECTION 10. Article 5.04(c), Insurance Code, is amended to
7-2 read as follows:
7-3 (c) Notwithstanding Subsections (a) and (b) of this article,
7-4 [on and after March 1, 1992,] rates for motor vehicles are
7-5 determined as provided by Article 5.13-2 of this code or by the
7-6 flexible rating program adopted under Subchapter M of this chapter,
7-7 as applicable.
7-8 SECTION 11. Article 5.06, Insurance Code, is amended by
7-9 adding Subsection (11) to read as follows:
7-10 (11) This article does not apply to forms used by insurers
7-11 for commercial motor vehicle insurance.
7-12 SECTION 12. Article 5.09(c), Insurance Code, is amended to
7-13 read as follows:
7-14 (c) Notwithstanding Subsection (a) of this article, [on and
7-15 after March 1, 1992,] rates for motor vehicles are determined as
7-16 provided by Article 5.13-2 of this code or by the flexible rating
7-17 program adopted under Subchapter M of this chapter, as applicable.
7-18 SECTION 13. Article 5.11(c), Insurance Code, is amended to
7-19 read as follows:
7-20 (c) Notwithstanding Subsections (a) and (b) of this
7-21 article, [on and after March 1, 1992,] rates for motor vehicles are
7-22 determined as provided by Article 5.13-2 of this code or by the
7-23 flexible rating program adopted under Subchapter M of this chapter,
7-24 as applicable.
7-25 SECTION 14. Article 5.14(b), Insurance Code, is amended to
7-26 read as follows:
7-27 (b) Notwithstanding Subsection (a) of this article, [on and
8-1 after October 1, 1991,] rates and forms for general liability,
8-2 commercial motor vehicle, and commercial property insurance
8-3 coverage subject to this subchapter are determined as provided by
8-4 Article 5.13-2 of this code.
8-5 SECTION 15. Article 5.15(h), Insurance Code, is amended to
8-6 read as follows:
8-7 (h) Notwithstanding Subsections (a)-(g) of this article,
8-8 rates for general liability, commercial motor vehicle, commercial
8-9 property, and all commercial casualty insurance coverage under
8-10 this article are determined, and hearings related to those rates
8-11 are conducted, as provided by Article 5.13-2 of this code.
8-12 SECTION 16. Article 5.96(a-1), Insurance Code, is amended to
8-13 read as follows:
8-14 (a-1) This article does not apply to commercial motor
8-15 vehicle insurance. Except as provided by Section 5(d), Article
8-16 5.101, of this code, this article does not apply to the setting of
8-17 benchmark rates for motor vehicle insurance and fire and allied
8-18 lines insurance under Subchapter M of this chapter.
8-19 SECTION 17. Section 1, Article 5.101, Insurance Code, is
8-20 amended to read as follows:
8-21 Sec. 1. PURPOSE; APPLICABILITY. (a) The program on flexible
8-22 rating is designed to help stabilize the rates charged for
8-23 insurance in lines of property and casualty insurance covered by
8-24 Subchapters A and C of this chapter.
8-25 (b) This article does not apply to:
8-26 (1) ocean marine insurance;
8-27 (2) inland marine insurance;
9-1 (3) fidelity, surety and guaranty bond insurance;
9-2 (4) errors and omissions insurance;
9-3 (5) directors' and officers' liability insurance;
9-4 (6) general liability insurance;
9-5 (7) commercial property insurance;
9-6 (8) commercial motor vehicle insurance;
9-7 (9) workers' compensation insurance;
9-8 (10) [(9)] professional liability insurance for
9-9 physicians and health care providers as defined in Article 5.15-1
9-10 of this code; or
9-11 (11) [(10)] attorney's professional liability
9-12 insurance.
9-13 SECTION 18. Section 5.01B, Insurance Code, is repealed.
9-14 SECTION 19. This Act takes effect September 1, 2001, and
9-15 applies only to an insurance policy that is delivered, issued for
9-16 delivery, or renewed on or after January 1, 2002. A policy that is
9-17 delivered, issued for delivery, or renewed before January 1, 2002,
9-18 is governed by the law as it existed immediately before the
9-19 effective date of this Act, and that law is continued in effect for
9-20 this purpose.